Abatement of Penalties

I previous posted an article about late filing penalties for business returns. Those penalties are significant and taxpayers often pay them not knowing it may be possible to get some relief or abatement of those penalties. 

First Time Penalty Abatement

Per the IRS you may be eligible for their First Time Penalty Abatement program if you meet the following requirements:

• You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
• You filed all currently required returns or filed an extension of time to file.
• You have paid, or arranged to pay, any tax due.

In addition to possible getting penalties abated, you may also get relief from interest on those penalties. Here is a quote from the IRS:

Interest charged on a penalty will be reduced or removed when that penalty is reduced or removed. If an unpaid balance remains on your account, interest will continue to accrue until the account is full paid.

Reasonable Cause 

If their were circumstances beyond your control that caused you to incur penalties you may also qualify for relief. Here is a quote from the IRS:

You may qualify for relief from penalties if you made an effort to comply with the requirements of the law, but were unable to meet your tax obligations, due to circumstances beyond your control.

The same IRS post mentions the following penalties are eligible for relief:

Failing to file a tax return

Failing to pay on time

Failing to deposit certain taxes as required

Other penalties as applicable. 

In Practice

The abatement of penalties may be available to a taxpayer but in practice an IRS representative probably will not mention these provisions when discussing what the taxpayer owes. The expression "if you don't ask for it you probably won't get it" certainly applies here. There is also some nuisance strategy in applying for or requesting penalty abatement. In many cases the amounts involved may be significant. Also, even if you have paid penalties in the past you still may be able to get a refund of those penalties paid. I help taxpayers get relief from penalties as well as make arrangements to pay taxes owed or in some cases negotiate a settlement for less than the amount due. For help getting relief from penalties and for help with your IRS tax issues and state issues use my email below to contact me to arrange an initial consultation. I charge $500 for the consultation but I will apply that initial consultation fee to any of my fees for services if you choose to use me to help you with your tax issues. 

Jeff Haywood, CPA

The CPA Superhero

jeff.jhtaxes@gmail.com

Sources:

IRS Penalty Relief Due to First Time Penalty Abatement or Other Administrative Waiver

IRS First Time Penalty Abatement Policy

Posts:

The Employee Retention Credit: Income Tax Issues

The Employee Retention Credit - Can Your Business Benefit From It?

Execution: The Employee Retention Tax Credit

Be careful when reading about tax law and its application, including my articles, because the wording and definitions are such a challenge and are influenced by writers perspective, specifically his own clients situations that he is mindful of and other situations the writer is not thinking of. The point is talk to your CPA about your situation and circumstances and don't rely on or make conclusions based on articles you read, including articles form irs.gov, because concepts and definitions are not very clear, and of course, they are subject to change. Now is the time to be having discussions about your situation and developing strategies for you and your business. Again, contact me using my information above to discuss your situation. I help business owners all over the U.S. and in foreign countries with their tax returns.